Did the Government Shutdown Help the Economy?

From New Delhi to San Francisco to London, and finally back in San Antonio,
I've been communicating one consistent theme to investors: Follow the money.

What's really important in following the money is for investors to not get
caught up in the negative web spun by the media. There's a lot of drama these
days about Obamacare and Washington dysfunction. Take the government shutdown
in October, when the House and Senate fought over the debt ceiling. Economic
data wasn't released, services were halted, national parks were closed, and "non-essential" government
workers were told to stay home.

As a result, GDP was expected to collapse.

Yet, data released this week reveal a different, stronger image of the U.S.
economy. I think Shakespeare would deem the media's fear mongering tactics
as "Much Ado About Nothing."

Third-quarter GDP growth was recently revised to 3.6 percent, much higher
than the estimated 2.8 percent figure. In November, more jobs were created
and the unemployment rate fell to 7 percent. Not a spectacular result, but
better than expected.

Perhaps people are gaining confidence in the U.S. economy, as figures show
a buying spree in large purchases of new homes and vehicles.

In October, U.S. new home sales rebounded from a one-year low. According to
Bloomberg, sales increased more than 25 percent, despite "this year's increase
in borrowing costs and property values." As a "sign of growing momentum" for
the housing market, applications for building permits also climbed to a five-year
high, says Bloomberg.

Many garages will be filled with new cars and more expensive trucks and sport
utility vehicles, as 16 million automobiles were sold in November, the fastest
pace since February 2007, according to Autodata. American automobile makers "drove
the blistering sales month," with General Motors sales growing nearly 14 percent
and Chrysler sales increasing 16 percent in November, says USA Today.

These facts support what we've been seeing in the U.S. purchasing manager's
index (PMI), which climbed to a ten-month high in November. Generally, PMIs
are a leading indicator of future economic trends.

So, we shouldn't hope for a government shutdown again ... or should we?

Here's a Simple Way to Follow the Money: Look for the leaders and understand
the laggards. Here's a chart showing the top sector performance among the S&P
500 Index since January. With the revolution occurring in the health care industry,
the sector has seen an incredible 40 percent increase, closely followed by
consumer discretionary. Industrials stocks, which rose about 35 percent, have
gotten a boost from PMI's jumper cables.

Meanwhile, defensive areas such as telecommunications and utilities have lagged,
as rising interest rates have made these defensive companies' dividend yields
less desirable.

To get an idea of the companies held in each of these sectors, the following
are the largest stocks in terms of market capitalization: In industrials, General
Electric (GE) is the biggest; in consumer discretionary, Amazon (AMZN) takes
the lead; and in health care, it's Johnson & Johnson (JNJ).

On a year-to-date basis, in industrials, airlines such as Delta (DAL), have
taken off. Among discretionary stocks, Netflix (NFLX) is the leader, and within
the health care sector, biotechnology companies, such as Celgene (CELG), have
increased the most.

Ranking sectors and stocks this way, it's easy to identify and follow the
leaders. It's like Newton's First Law of Motion: once in motion, these stocks
tend to stay in motion.

We believe the domestic bull run will also stay in motion, as the synchronized
global recovery continues to take place. Just this week, Japan announced additional
fiscal stimulus. In addition, China
continues to grow, with sweeping economic reforms taking place, and Europe
is expected to recover. Further, based on fund flows of investors selling
their bonds and buying equities, we expect this trend to continue for a while.
As I often say, trying
to stop a bull market has risks.

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Frank Holmes is CEO and chief investment officer of U.S. Global Investors,
Inc., which manages a diversified family of mutual funds and hedge funds specializing
in natural resources, emerging markets and infrastructure.

The company's funds have earned more than two dozen Lipper Fund Awards and
certificates since 2000. The Global Resources Fund (PSPFX) was Lipper's top-performing
global natural resources fund in 2010. In 2009, the World Precious Minerals
Fund (UNWPX) was Lipper's top-performing gold fund, the second time in four
years for that achievement. In addition, both funds received 2007 and 2008
Lipper Fund Awards as the best overall funds in their respective categories.

Mr. Holmes was 2006 mining fund manager of the year for Mining Journal, a
leading publication for the global resources industry, and he is co-author
of "The Goldwatcher: Demystifying Gold Investing."

He is also an advisor to the International Crisis Group, which works to resolve
global conflict, and the William J. Clinton Foundation on sustainable development
in nations with resource-based economies.

Mr. Holmes is a much-sought-after conference speaker and a regular commentator
on financial television. He has been profiled by Fortune, Barron's, The Financial
Times and other publications.

Please consider carefully a fund's investment objectives, risks, charges and
expenses. For this and other important information, obtain a fund prospectus
by visiting www.usfunds.com or by calling
1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed
by U.S. Global Brokerage, Inc.